Weekly Forex technical forecast February 25 - March 1.

Traders and investors continued seeking direction for the vast majority of assets in the financial markets this past week. The overall technical sentiment remained the same as for several previous weeks, while volatility and trading volume were lower. With the month-end approaching rapidly, the price action and crucial technical levels are getting more important for the long-term analysis as monthly and weekly timeframes require consecutive confirmations from close prices of the current trend direction. Otherwise, a deep retracement might take place, especially in the equities markets which were recovering October's and November's losses recently. US stock indices kept climbing North this past week, and some of them even managed to break crucial psychological and technical resistance, however, the bullish momentum is getting exhausted and the speed with which indices were gaining strength is slowing down. So, the S&P 500 added only 0.46% to its value, NASDAQ gained 0.56%, while Dow Jones Industrial Average climbed 0.57%, closing the trading week at the highest level since October 8 when the market crash happened. Asian stock indices gained even more than that with Japanese Nikkei 225 soaring by 2.51%. European indices showed a moderate performance: German DAX 30 +1.04%, French CAC 40 +1.22%, while British FTSE 100 suffered losses of -0.80%.

The foreign exchange market was comparatively predictable, at least for the first half of the past week. The US dollar index, measuring the volume-weighted basket of six major currencies, accelerated its losses on Monday - Wednesday, testing the 3-weeks low of 96.29. The upside bounce wasn’t deep and it was more of consolidation rather than a reversal pattern, and DXY finished the trading week at 96.49, closer to the local bottom. Those greenback's weakness has been noticed on the back of EUR/USD retracement. The single European currency managed to recover previous losses and even tested resistance around 1.1400 handle. However, the selling pressure is still strong and the pair slipped back toward 1.1334 weekly close, charting weekly gain of 0.38%. The British Pound was even stronger than that: GBP/USD added 1.25% to its exchange rate. USD/CHF lost -0.43%, while USD/JPY was almost flat (+0.18%). Commodity currencies were moving in different directions though. The Australian dollar failed to sustain the bullish momentum midweek and slipped back down, finishing the trading week with -0.19% result. In contrast, the New Zealand dollar dipped even lower but reversed (-0.26%). The Canadian dollar extended gains versus the greenback (USD/CAD -0.85%).

It’s also worth noticing the sharp pullback of precious metals after gold failed to hold the gains above $1340 per ounce ($1327.89 weekly close), adding 0.51% to its price and charting a long upper shadow on the weekly candlestick. WTI Crude oil price gained another 2.5% this past week, while the surplus between WTI and Brent Crude prices had widened.

DJIA: Bullish.

The Dow Jones benchmark, measuring the total cost of 30 richest companies' shares of the United States, had breached the psychological level of 26000 points this past week, charting the highest weekly close since the plunge started on October 8. The 9-weeks impressive rally allowed DJIA to bounce off the multi-month bottom, gaining 4306.8 points, which is almost 20% from the value noted before the last Christmas. That price action proves the fact that the latest market was nothing but the technical retracement from the multi-year uptrend. If we took 2-years-to-date period, we would get an obvious growth of the stock index for 25%, which is 12.5% per year on average. The weekly chart below also shows 4 consecutive weekly closes above the 50-week simple moving average, the MACD lines crossed each other, pointing to the bullish reversal pattern four weeks ago, 5 consecutive weeks of the Relative Strength Index (21-weeks period) closing above the 50% level. Although the technical outlook is completely bullish, it's hard to expect DJIA to accelerate the bullish run in the nearest weeks as shorter timeframes are getting overbought and the trend momentum is getting exhausted. At the same time, the buy-and-hold trading strategy does not look too dangerous, as the likelihood of a deep bearish retracement is quite low so far. Therefore, any pullback on the daily timeframe has to be considered as buying opportunity with the EMA21 curve as the best level to monitor.

Weekly Forex technical forecast February 25 - March 1.


DXY: Bearish.

The US dollar index had extended the negative technical outlook this past week. The intraday four-hour chart below shows clearly a bearish sentiment after the failed test of year-to-date highs on February 15. There was a weekend gap last Monday which allowed the bears to overcome a strong defensive barrier of the 34-bars exponential moving average (green curve) which used to hold prices since the beginning of February. Moreover, the bearish achievement was confirmed by the cross of two moving averages, which underlined the bearish continuation in the medium-term perspective. Another important observation is that the RSI oscillator (with a modified period to 21-bars) remained below the 50% level despite a couple of bullish bounces this past week. The nearest target for the greenback is to test the local bottom of 95.89, which was the highest close price during the bullish bounce on January 30. If that static horizontal support was breached, a deeper slide toward the bottom of 95.17 would become very likely. We suggest that the US dollar index should extend the recent losses in the last week of February and beyond.

Weekly Forex technical forecast February 25 - March 1.


GBP/USD: Bullish.

The British Pound was one of the most attractive currencies among majors to trade on last week. It had the same weekend gap as the DXY on Monday, breaking through important resistance. Tuesday became the best day for the Sterling as GBP/USD bounced off the crossover of two moving averages (EMA34 and SMA55) and accelerated the bullish rally which caused the test of several technical resistance levels. Although the psychological round-figure resistance of 1.3000 does not play a huge role in the technical analysis, GBP/USD sed to consolidate gains around that level. There also comes an important Fibonacci retracement level of 78.6% (1.3045), which was completely breached as the weekly close was noticed at 1.3049. The main problem for

Weekly Forex technical forecast February 25 - March 1.


the bulls in that area was the bearish divergence which occurred after the series of higher highs on the chart and lower highs of the RSI oscillator. However, we consider that the divergence has been already worked out as the RSI bounced off the 50% level and the price was supported by the 34-bar exponential moving average. Having that in mind, we bet on GBP/USD to continue the bullish rally this week. The nearest target for the bulls is placed slightly above 1.31 handle (the highest price on February 4). Once that barrier is breached, we could easily see the pound testing the local top in 2019 (1.3218), and September’s peak of 1.3299 in extension.

Weekly Forex technical forecast February 25 - March 1.


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